Mr Fernandes, 44, and Mr Kanyare, 53, both of Edgware, north-west London, and Dominic Martins, 45, of Stanmore, north-west London, have pleaded not guilty to two charges of trying to set up funding or property for terrorism.

Posed as 'Mohammed'

They also deny one charge of conspiracy to possess "a highly dangerous mercury-based substance" for the purposes of terrorism.

The jury has heard that Mr Mahmood played the part of a Muslim, called Mohammed, who had nearly a kilogram of red mercury which he was looking to sell.

The Beckham kidnap plot was front page news

The prosecution claim the defendants were looking for a supply of red mercury for a buyer from the Middle East who was willing to pay £500,000.

The defendants were arrested by police in September 2004 after Mr Mahmood contacted anti-terrorist squad officers.

Mr Mahmood was led to the defendants by an informant, who can only be referred to as Mr B, who claimed he went to the newspaper after the police failed to respond to his warnings.

The News of the World's investigations editor appeared in court clean shaven and wearing a smart pinstripe suit, mauve shirt and dark tie.

He has worked on hundreds of undercover probes into suspected criminals as well as celebrity stings on figures such as Sven-Goran Eriksson and the Countess of Wessex.

Beckham kidnap plot

One of the cases he investigated was the so-called Beckham kidnap plot.

In October 2002 several men were arrested by police after a tip-off by Mr Mahmood, who had learned of an alleged plot to kidnap Victoria Beckham, wife of the England footballer.

All charges were later dropped against the alleged kidnappers after it emerged the News of the World had paid £10,000 to its main informant, Florim Gashi, a convicted criminal.

Mr Mahmood denied keeping from police the fact Mr Gashi had been paid.

He told the court it had been a very high profile story and had gone as high as the commissioner of the Metropolitan Police.

"The suggestion that we would lie to them intentionally doesn't hold any water. We just couldn't get away with it," he said.

He insisted that although Mr Gashi was paid his only motivation had been that he was an asylum seeker and in helping Mr Mahmood he hoped to be given permission to stay in the country.

I put it to you that you deliberately hold back from time to time from giving the police information and hand it over just before publication, not caring whether it will help justice, just caring whether it helps your front page

Stephen Solley QC

Mr Solley asked Mr Mahmood why he had only given the police the identity of the kidnap target on the Saturday morning, a few hours before the suspects were arrested.

He said: "I put it to you that you deliberately hold back from time to time from giving the police information and hand it over just before publication, not caring whether it will help justice, just caring whether it helps your front page."

"That's not true," replied Mr Mahmood.

He added: "One of those individuals sued us for libel but lost and the judge concluded there was a credible plot and we had acted entirely properly."

Mr Solley claimed Mr Mahmood helped his informants "set people up" without carrying out any proper journalistic checks on their claims.

Mr Mahmood replied: "No. We tape as much as we can and we gather evidence. The suggestion that we make up stories is just not right."